Ingco vs. Sandiganbayan

The filing of a complaint with the Office of the Ombudsman for preliminary investigation tolls the running of the prescriptive period. A bank officer who merely evaluates and recommends loan applications, without authority to conclude or bind the bank, does not enter into a contract or transaction on behalf of the Government under Section 3(g) of R.A. No. 3019, and a mere error of judgment is not the crime under Section 3(e) in relation to Section 3(g); private individuals who are not public officers cannot be prosecuted under those provisions independently of a public officer.

Domingo Ingco was a Senior Vice-President of the Philippine National Bank, a government-owned bank. Ernesto Magboo and Herminio Alcasid were, respectively, Chairman of the Board of Directors and President and General Manager of Cresta Monte Shipping Corporation, a domestic corporation engaged in cargo and passenger shipping. The National Investment and Development Corporation was a wholly-owned subsidiary of PNB, and the two institutions shared common officers. The dispute implicated R.A. No. 3019, the Anti-Graft and Corrupt Practices Act, particularly Sections 3(e) and 3(g).

Cresta Monte Shipping Corporation was a domestic corporation registered with the Securities and Exchange Commission on October 3, 1976, with the primary purpose of engaging in domestic and/or overseas cargo and passenger shipping. Its officers and directors included Ernesto S. Magboo as Chairman of the Board of Directors and controlling stockholder; Herminio Alcasid as President and General Manager; and Mario Ramos, Nora Roasa, and Nelson Magboo as directors. The corporation started operations sometime in July 1977 and, at the time of the complaint, maintained and operated nine vessels carrying logs, lumber and wood products, copper, iron ore, heavy machineries, and general cargo to Southeastern Asian countries. Domingo Ingco was a Senior Vice-President of the Philippine National Bank, a government-owned bank, and was later described as a former Vice-President.

Sometime in 1977 and 1978, Cresta Monte obtained two loan accommodations from PNB. Through Board Resolution No. 703 dated September 22, 1977, PNB extended a loan accommodation of US$5,910,000 to be utilized for the purchase of two cargo vessels from Japan. The loan was secured by (1) a Guaranty Loan of the National Investment and Development Corporation approved under its Board Resolution No. 223 dated December 22, 1976 amounting to US$7.8M; and (2) the joint and several signatures of Ernesto Magboo and Herminio Alcasid and their spouses. The NIDC loan was secured by (1) a chattel mortgage on the second-hand vessel to be purchased from the proceeds of the loan, at an acquisition price of US$1.89 Million (P14,150,430.00); (2) the joint and several signatures of Ernesto Magboo and Herminio Alcasid and their spouses; and (3) a pledge of 100% shares of stocks.

Subsequently, per Board Resolution No. 642 dated March 27, 1978, PNB approved Cresta Monte's request for PNB to advance US$7.5 Million to be remitted to the Bank of Tokyo, Shimbashi Branch, Tokyo, Japan for the account of Liberation Maritime Carriers Co. Ltd. to cover the purchase price of two brand-new oceangoing vessels with a unit cost of US$3.75 Million. This loan was secured by (1) a Guaranty by NIDC in the amount of US$7.8 Million approved under its Board Resolution No. 223 dated December 22, 1976; and (2) the joint and several signatures of Ernesto Magboo and Herminio Alcasid and their spouses. The NIDC loan was secured by (1) a chattel mortgage on second-hand vessels at an acquisition cost of US$1.89 Million or P14.175 Million (P7.50 = $1); (2) a chattel mortgage on two cargo vessels (M/V Amasia and M/V Kusonaki Maru) at an acquisition cost of US$5.91 Million or P44.325 Million; and (3) the joint and several signatures of Ernesto Magboo and Herminio Alcasid and their spouses. The value of the collateral security totaled P58.500 Million.

PNB charged Ingco with conspiring with the other respondents in having the loan applications approved even without a project feasibility study and notwithstanding that the credit rating submitted by the Credit Department showed more adverse comments. PNB further alleged that the collaterals offered by Cresta Monte were deficient. PNB likewise charged the officers and directors of Cresta Monte with persuading and inducing Ingco to recommend the approval of the loans under disadvantageous terms and conditions. In his Counter-Affidavit, Ingco denied the imputation of conspiracy. He declared that the commercial viability of the project was thoroughly evaluated by the Credit Department, which gave the company a rating of "B-1," meaning good quality. He stated that he could not be faulted for the alleged failure to require the Magboo and Alcasid spouses to submit their joint and several signatures because the implementation of approved loans and compliance with requirements devolved on the operating department, the International Department. He also asserted that there was no collateral deficiency at the time the loans were granted and that NIDC had the recognized stature and capacity to act as guarantor for the loans. The loans, he said, were granted with proper safeguards and conditions to protect PNB's interests and with the approval of the Monetary Board after evaluation by the Central Bank.

The Committee on Behest Loans under the Office of the Special Prosecutor in the Office of the Ombudsman found that the loans were in the nature of behest loans. It noted that NIDC was a wholly-owned subsidiary of PNB; that the President of PNB and all members of the PNB Board of Directors were also the President and members of the NIDC Board of Directors; and that NIDC's guarantee to PNB was therefore illusory. It also found that, with respect to the US$7.5 Million loan, the requisite joint and solidary signatures of Magboo and Alcasid and their spouses were submitted only a year after the approval and implementation of the loan. The Committee concluded that there was pressure and instructions from high government officials for the release of the loans; that Ingco, who conspired and confederated with Magboo and Alcasid, was chiefly responsible for the grant of the loans under manifestly and grossly disadvantageous terms and conditions; and that they were indictable for violation of Section 3(e) in relation to Section 3(g) of R.A. No. 3019. The information filed on July 21, 1993 alleged that Ingco favorably recommended the approval of the loan applications notwithstanding that Cresta Monte had a capitalization of only P1 Million; that the loans were guaranteed only by NIDC, a subsidiary of PNB; that the joint and several signatures of Magboo and Alcasid and their spouses were not given in violation of the terms and conditions of the NIDC guaranty loan; that no project feasibility study was conducted to evaluate the commercial viability of the proposed undertaking; that the Credit Rating submitted by the PNB Credit Department contained adverse comments; and that the collaterals offered by Cresta Monte were deficient, thereby allowing the Government to enter into a manifestly and grossly disadvantageous contract and causing undue injury and damage by default, leaving an unpaid balance of P511.437 Million as of March 31, 1986.

• Prescription: Petitioners moved to quash the information on the ground that the offense charged had already prescribed, more than ten years having elapsed from the alleged commission in 1977 and 1978 to the filing of the information in 1993.
• Facts Do Not Constitute an Offense: Petitioners moved to quash on the ground that the facts alleged in the information did not constitute an offense under the invoked law.
• Ingco's Counter-Affidavit Defenses: Ingco denied conspiring with the other respondents; maintained that the Credit Department thoroughly evaluated the project and gave a "B-1" rating; asserted that implementation and compliance with loan requirements devolved on the International Department, not him; claimed there was no collateral deficiency and NIDC was a capable guarantor; and stated that the loans had proper safeguards and Monetary Board approval after Central Bank evaluation.

• Sufficiency of the Information: Respondent Sandiganbayan maintained that the facts charged constitute the offense of violation of Section 3(e) in relation to Section 3(g) of R.A. No. 3019 because the accused were alleged to have acted in conspiracy in the loan applications and approvals upon irregular, improper, and prejudicial recommendations; an information need only describe and charge an indictable offense with its essential elements.
• Elements Alleged: Sandiganbayan ruled that the elements of Section 3(e)—evident bad faith, manifest partiality, and undue injury to the Government—and of Section 3(g)—execution of contracts or transactions manifestly and grossly disadvantageous to the Government, regardless of personal gain—were recited in the information.
• Prescription: Sandiganbayan held that the offense had not prescribed, reckoning the prescriptive period from May 26, 1987, when PNB filed the complaint, because the filing of the complaint with the Fiscal's Office interrupts the period of prescription, a doctrine applicable to prosecutions under the Revised Penal Code or a special law such as R.A. No. 3019.

• Prescription: Whether the offense charged had already prescribed.
• Sufficiency of the Information: Whether the facts alleged in the information constitute an offense under Section 3(e) in relation to Section 3(g) of R.A. No. 3019.

• Prescription: No. The offense had not prescribed; the filing of the complaint with the Office of the Ombudsman on May 26, 1987 tolled the running of the then applicable ten-year prescriptive period, making the July 21, 1993 information timely.
• Sufficiency of the Information: No. The facts alleged do not constitute a violation of Section 3(e) in relation to Section 3(g) of R.A. No. 3019 as to petitioners; Ingco merely evaluated and recommended the loan applications without authority to conclude or bind PNB, and Magboo and Alcasid were not public officers who could be prosecuted under those provisions independently of a public officer.

• Prescription: The Court affirmed the Sandiganbayan. Although more than ten years elapsed from the alleged commission on September 22, 1977 and/or March 27, 1978 to the filing of the information on July 21, 1993, the then applicable ten-year prescriptive period was effectively suspended by the filing of the complaint on May 26, 1987 with the Ombudsman. In Llenes vs. Dicdican, the Court summarized the settled rule: the filing of the complaint with the municipal trial court even for preliminary investigation only suspends the running of the prescriptive period; Francisco vs. Court of Appeals broadened this to the filing of the complaint in the fiscal's office for preliminary investigation; and Calderon-Bargas vs. Regional Trial Court of Pasig, Metro Manila reiterated Francisco. The rationale applies to complaints filed with the Office of the Ombudsman against public officers and employees for purposes of preliminary investigation. Thus, the May 26, 1987 complaint tolled the period, and the information filed on July 21, 1993, following the Ombudsman's approval on July 12, 1993 of the resolution recommending prosecution, was well within the ten-year prescriptive period.
• Sufficiency of the Information: Under Section 3(e), the elements are: (1) the accused are public officers or private persons charged in conspiracy with them; (2) the public officers commit the prohibited acts during the performance of their official duties or in relation to their public positions; (3) they cause undue injury to any party, including the Government; (4) the injury is caused by giving unwarranted benefits, advantage, or preference; and (5) the public officers acted with manifest partiality, evident bad faith, or gross inexcusable negligence. Under Section 3(g), the elements are: (1) the accused is a public officer; (2) he entered into a contract or transaction on behalf of the government; and (3) the contract or transaction is grossly and manifestly disadvantageous to the government. The information alleged that Ingco favorably recommended approval of the loans despite Cresta Monte's P1 Million capitalization, absence of a project feasibility study, adverse PNB Credit Department comments, and deficient collaterals, and that Magboo and Alcasid failed to give their joint and several signatures as required. However, Ingco, though a ranking PNB official, had neither the title nor the authority to conclude and bind the bank to the questioned transactions. PNB's affairs were directed and its properties managed by its Board of Directors, and the President of the Bank had the power and duty to execute all contracts and enter into authorized transactions. Ingco's role was confined to evaluation and study of the loan applications and to making a report and recommendation to the Board, which was not obliged to approve it. Any wrong appreciation or poor assessment of the loan application was at most an error of judgment, not the crime contemplated in Section 3(e) in relation to Section 3(g). Neither Magboo nor Alcasid was a public officer; independently of Ingco, they could not be prosecuted under those provisions, and PNB's remedy against them lay elsewhere.

• Tolling of Prescriptive Period by Filing Complaint with the Ombudsman — The filing of a complaint with the Office of the Ombudsman against public officers or employees for purposes of preliminary investigation tolls the running of the prescriptive period. This rule traces the doctrine from People vs. Olarte (second case) and Francisco vs. Court of Appeals, reiterated in Calderon-Bargas vs. Regional Trial Court of Pasig, Metro Manila and Llenes vs. Dicdican. Applied to the case, the May 26, 1987 complaint tolled the ten-year period, so the July 21, 1993 information was timely.
• Elements of Section 3(e), R.A. No. 3019 — The elements are: (1) the accused are public officers or private persons charged in conspiracy with them; (2) the public officers commit the prohibited acts during the performance of their official duties or in relation to their public positions; (3) they cause undue injury to any party, including the Government; (4) the injury is caused by giving unwarranted benefits, advantage, or preference; and (5) the public officers acted with manifest partiality, evident bad faith, or gross inexcusable negligence. The information failed because Ingco's acts did not amount to entering into a contract or transaction on behalf of the Government, and the private petitioners could not be prosecuted independently.
• Elements of Section 3(g), R.A. No. 3019 — The elements are: (1) the accused is a public officer; (2) he entered into a contract or transaction on behalf of the government; and (3) the contract or transaction is grossly and manifestly disadvantageous to the government. Ingco did not have authority to conclude and bind PNB, so he did not enter into the transaction on behalf of the Government; Magboo and Alcasid were not public officers.
• Mere Error of Judgment Is Not Criminal — A public official's wrong appreciation or poor assessment of a loan application, without more, is an error of judgment and does not constitute the crime under Section 3(e) in relation to Section 3(g) of R.A. No. 3019. The Court applied this to Ingco's recommendation.
• Private Persons Under Section 3(e) in Relation to Section 3(g) — Private individuals who are not public officers cannot be prosecuted under Section 3(e) in relation to Section 3(g) of R.A. No. 3019 independently of a public officer. This was applied to Magboo and Alcasid.

• "The complaint filed on 26 May 1987 before the Ombudsman, in fine, is deemed to have tolled the running of the prescriptive period, and thus the filing of the information on 21 July 1993, following the approval by the Ombudsman on 12 July 1993 of the resolution recommending the prosecution of herein petitioners, must perforce be held to be well within the ten-year prescriptive period." — This passage states the Court's ruling on prescription and the tolling effect of the Ombudsman complaint.
• "Petitioner Ingco might have been a ranking official of PNB but, unassailably, he neither had the title nor the authority to conclude and bind the bank to the questioned transactions." — This is the core factual-legal basis for holding that Ingco did not enter into a contract or transaction on behalf of the Government under Section 3(g).
• "It is probable, evident in retrospect, that Ingco has had a wrong appreciation of and even a poor assessment on the loan application of Monte Cresta, but it is not much more than an error of judgment. It would be hard to accept, let alone to render a firm verdict, that such an error, to which all public officials are, at one time or another, susceptible of making in their years of service to the government, would constitute the crime contemplated in Section 3(e), in relation to Section 3(g), of R.A. No. 3019." — This passage articulates the rule that a mere error of judgment is not criminal under the invoked provisions.
• "Neither of petitioners Magboo and Alcasid is a public officer. Independently of Ingco, they cannot be prosecuted under the provisions of the law in question. The remedy of the PNB against them would lie elsewhere." — This passage states the holding that private co-accused cannot be prosecuted under Section 3(e) in relation to Section 3(g) independently of a public officer.

• Llenes vs. Dicdican, G.R. No. 122274, 31 July 1996 — Controlling precedent cited for the rule that the filing of a complaint with the Office of the Ombudsman for preliminary investigation tolls the prescriptive period.
• Francisco vs. Court of Appeals, 122 SCRA 538 — Cited as broadening the Olarte doctrine to hold that the filing of a complaint in the fiscal's office for preliminary investigation suspends the running of the prescriptive period.
• Calderon-Bargas vs. Regional Trial Court of Pasig, Metro Manila, 227 SCRA 56 — Cited as reiterating Francisco and supporting the tolling rule applied to the Ombudsman complaint.
• People vs. Olarte, 19 SCRA 494 — Cited as the second Olarte case that resolved the doctrine that filing a complaint with the municipal trial court even for preliminary investigation only suspends the prescriptive period.
• Medija, Jr. vs. Sandiganbayan, 218 SCRA 219; Ponce de Leon vs. Sandiganbayan, 186 SCRA 745 — Cited for the elements of the offense under Section 3(e) of R.A. No. 3019.
• People vs. Sandiganbayan, 211 SCRA 241 — Cited for the change in the prescriptive period from ten years to fifteen years by B.P. Blg. 195, although the Court applied the ten-year period in force at the time of the offense.

• Section 3(e), R.A. No. 3019 — Defines the corrupt practice of causing undue injury to any party, including the Government, or giving any private party unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. The Court enumerated its elements and held that the information failed to state the offense because Ingco did not have authority to bind PNB and merely made a recommendation.
• Section 3(g), R.A. No. 3019 — Defines the corrupt practice of entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited. The Court held that Ingco did not enter into the transaction on behalf of the Government and that Magboo and Alcasid were not public officers.
• Section 11, R.A. No. 3019, as amended by B.P. Blg. 195 — Governs the prescriptive period. At the time of the alleged violations, the period was ten years; B.P. Blg. 195, approved on March 16, 1982, increased it to fifteen years. The Court applied the ten-year period and found it tolled by the Ombudsman complaint.
• Section 3(a), Rule 117, Revised Rules of Court — Authorizes quashal of an information when the facts averred do not amount to an offense. The Court applied the fundamental test of whether the facts, if hypothetically admitted, would establish the essential elements of the crime.
• Section 6, Rule 110, Rules of Court — Requires the information to state the acts or omissions complained of as constitutive of the offense. The Court examined the information's allegations against the elements of the charged provisions.
• Sections 9 and 12, Charter of the Philippine National Bank — Provide that PNB's affairs are directed and its properties managed and preserved, and its corporate powers exercised, by its Board of Directors, and that the President of the Bank has the power and duty to execute all contracts and enter into all authorized transactions. The Court used these provisions to show that Ingco lacked authority to conclude and bind PNB.

Justices Bellosillo and Hermosisima, Jr., concurred. Justice Kapunan took no part; Justice Padilla was on leave.